Arbeitspapier
Learning, endogenous indexation and disinflation in the New-Keynesian model
This paper introduces adaptive learning and endogenous indexation in the New-Keynesian Phillips curve and studies disinflation under inflation targeting policies. The analysis is motivated by the disinflation performance of many inflation-targeting countries, in particular the gradual Chilean disinflation with temporary annual targets. At the start of the disinflation episode price-setting firms' expect inflation to be highly persistent and opt for backward-looking indexation. As the central bank acts to bring inflation under control, price-setting firms revise their estimates of the degree of persistence. Such adaptive learning lowers the cost of disinflation. This reduction can be exploited by a gradual approach to disinflation. Firms that choose the rate for indexation also re-assess the likelihood that announced inflation targets determine steady-state inflation and adjust indexation of contracts accordingly. A strategy of announcing and pursuing short-term targets for inflation is found to influence the likelihood that firms switch from backward-looking indexation to the central bank's targets. As firms abandon backward-looking indexation the costs of disinflation decline further. We show that an inflation targeting strategy that employs temporary targets can benefit from lower disinflation costs due to the reduction in backward-looking indexation.
- Sprache
-
Englisch
- Erschienen in
-
Series: CFS Working Paper ; No. 2008/17
- Klassifikation
-
Wirtschaft
Business Fluctuations; Cycles
Demand for Money
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
Central Banks and Their Policies
- Thema
-
Learning
Monetary Policy
New-Keynesian Model
Indexation
Inflation Targeting
Disinflation
Recursive Least Squares
Inflation Targeting
Inflationsbekämpfung
Geldpolitik
Lernen
Indexierung
New-Keynesian Phillips Curve
Chile
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Wieland, Volker
- Ereignis
-
Veröffentlichung
- (wer)
-
Goethe University Frankfurt, Center for Financial Studies (CFS)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2008
- Handle
- URN
-
urn:nbn:de:hebis:30-56907
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Wieland, Volker
- Goethe University Frankfurt, Center for Financial Studies (CFS)
Entstanden
- 2008
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